Chester Company began Year 2 with a note payable of $20,000 and an interest payable of $800.During the year,the company accrued an additional $400 of interest expense,and paid off the note with interest.What is the amount of cash flows for financing activities that will be reported on the statement of cash flows as a result of these transactions?
A)$1,200 outflow
B)$20,000 outflow
C)$20,400 outflow
D)$21,200 outflow

Question

Quizplus · Accepted Answer

Only the $20,000 outflow relating to the payment of the note is considered an outflow for financing activities.The $1,200 cash outflow for interest is considered an operating activity.

Chester Company Began Year 2 with a Note Payable of $20,000